Financial Overview

(in millions of JPY)

	FY2010	FY2009	Rate of Change (%)	Factors
Overall
Sales	428,977	408,430	5.0	-
Operating income	37,434	36,054	3.8	-
Ordinary income	34,319	35,983	(4.6)	-
Current net income	10,012	6,217	61.0	-

Factors
1)
-Consolidated sales rose year-on-year by 5%, thanks to greater sales at the Company’s main business unit, the automotive lighting business.

<Japan>
-Sales at the automotive lighting business increased 1% year-on-year, to 256.1 billion yen, thanks to strong sales of eco-cars, especially due to the higher volume of units produced as a result of the eco-car sales incentives that were introduced.

<North America>
-Unit production volume was greater due to the slight recovery in consumer spending based on government-sponsored sales incentives. Sales on a monetary level essentially remained flat at 45.5 billion yen because of negative currency translation.

<China>
-China continued to experience economic growth because of economic-stimulus incentives and rising consumer spending. As a result, vehicle unit-sales due to the demand in China increased significantly for the year. Sales increased 22.4% year-on-year, reaching 83.5 billion yen.

<Asia>
-There was a significant increase in vehicle-unit sales because of the high economic growth in Thailand and other countries, with the Company working to increase customer orders of automotive lighting products. Sales were 14.3% higher year-on-year, reaching 31.3 billion yen.

<Europe>
-Even with the economy in Europe stagnating, the Company tried to increase sales of automotive lighting products to mainly European car makers. However, due to negative currency translation, the Company’s sales decreased 10.4% year-on-year, to 12.4 billion yen.

>>>Financial Forecast for the Next Fiscal Year(Sales, Operating Income etc.)

R&D Expenditure

(in millions of JPY)

	FY2010	FY2009	FY2008
Overall	17177	17,300	18,800
Automotive business	-	16,600	17,500

R&D Structure

-The Company’s R&D structure is based on functions located in four regions, which are the Central R&D Center and local R&D departments in Japan ; the North American Lighting Technical Center the U.S.A.; the Technical Center at Koito Shanghai Lighting; and the Koito Europe NV Technical Center in Europe. The Company’s R&D activities are designed to respond to R&D activities being conducted by global car makers that are becoming multi-polarized. In total, there are 2,112 staff members working in R&D at the Group.

R&D Activities

-Total R&D expenses for the year were 17.1 billion yen. By region, the expenses were as follows. Japan: 11.0 billion yen, North America: 2.2 billion yen, China: 2.2 billion yen, Asia: 1.2 billion yen, and Europe: 300 million yen.

<Japan>
-Developing core technologies in the field of automotive lighting, namely in the areas of optics, electronics, machinery, structural mechanics, etc.
-Developing production technology
-Developing simulation technology
-Developing electronic parts for railroad cars
-Developing systems that will serve as ITS equipment
-Developing systems that respond to the Internet
-Developing auto parts outside of the lighting sector
-Developing aircraft parts
-Developing new products for new business areas.

<North America, China, Asia, and Europe>
- Developing core technologies in the field of automotive lighting, namely in the areas of optics, electronics, etc.
-Developing production technology

Product Development

LED (Light Emitting Diode) Headlamp
-Developed and started deliveries to automakers of the third generation of an LED (Light Emitting Diode) headlamp with substantially reduced cost. Japan's major supplier of automotive lamps is seeking application of the new product to next generation vehicles like a hybrid and electric vehicle with the aim of enlarging its installation in other large volume car segments, including compact models when its production is expected to produce economies of scale around 2015. (From an article in the Nikkan Jidosha Shimbun on September. 28, 2010)

Licensing of Technology from Other Companies

(As of Mar. 31, 2010)

Company	Products	Associates	Contract Period
Electro Optica, S.A. de C.V (Mexico)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	19 years from Apr. 18, 1992
Industrias Arteb S.A (Brazil)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	5 years from Jun. 8, 2006
Farba Otomotiv Aydinlatma ve Plastik Fabrikalari A.S. (Turkey)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	15 years from Oct. 24, 1997
Automotive Lighting UK Ltd. (UK)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	18 years from Feb. 24, 1993
Hella Australia Pty Ltd. (Australia)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	20 years from May 1, 1994
Lumotech (Pty.) Ltd. (South Africa)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	5 years from May 4, 2006
EP Polymers (M) Sdn. Bhd. (Malaysia)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	20 years from Apr. 29, 1995
AuVitronics Ltd. (Pakistan)	Automotive Lighting and Accessories	Provide technological information, sales and manufacturing license	10 years from Mar. 7, 1995

Capital Expenditure

(in millions of JPY)

	FY2010	FY2009	FY2008
Overall	16,400	15,700	31,100
Automotive business	-	14,500	29,200

 
-The Company invested in its facilities and equipment mainly in Japan for the purpose of rationalizing and renewing production operations, enhancing the level of product quality, and reducing the cost of goods. The following is a breakdown of capital investments by region: Japan (16.4 billion yen), North America 600 million yen, China (3.9 billion yen), Asia (2.4 billion yen), and Europe 100 million yen.

Investments Outside Japan

<Thailand>
-The Company will strengthen its business in Thailand. As early in 2012, the company will establish its fourth plant, while establishing a research and development facility adjacent to its existing factory. The company’s Thai operations are now approaching the limits of its capacity, as demand for automobile lighting products is rapidly growing in the country. By adding a new plant and setting up a research facility, the company intends to meet the needs of the local market more promptly in addition to increasing its production capacity. Koito’s subsidiary, Thai Koito Company Limited (Thailand), currently has three plants at the Bang Phli Industrial Estate in Samutprakarn. Although they are located next to each other, there is not enough space to make a large-scale expansion at the existing location. Having foreseen that it would be unable to meet projected rise in requirements in the future, Koito already purchased a piece of land for a new plant in 2007. The construction plan, however, has been put on ice, because the automotive demand has thereafter plummeted hit by the financial crisis triggered by the collapse of the Lehman Brothers. Seeing a recovery and increase in demand in the Thai market, Koito has now decided to resume the project to boost its capacity. (From an article in the Nikkan Jidosha Shimbun on January 31, 2011)

<China>
-The Company will increase its production capacity of automotive lighting equipment in China.  It aims to open its second plant in Guangzhou in 2012　in order to enhance its supply capability in South China.  In consideration of raising its supply capacity in North China including Tianjin as well, it has started researches for establishing a new plant there.  Koito plans to start operations at the new plant in North China as early as 2013.  While local, Japanese, U.S. and European automakers are working on huge expansion of automobile production, Koito aims to expand its business in China by establishing cost-competitive business operations there. (From an article in the Nikkan Jidosha Shimbun on January 11, 2011)

<U.S.A.>
-The Company will step up its investment activities in the U.S. The company will establish a die plant in Kentucky, while adding a headlamp factory to its Alabama plant, which is currently specializing in rear combination lamps. The new operations are scheduled to start in the spring of 2012. By heavily investing in its U.S. business, which has been receiving increased orders from Japanese and U.S. automakers, the company will enhance its production capacity and cut down on production cost. North American Lighting, Inc. (NAL), Koito's U.S. subsidiary, now has four plants: three plants in Illinois, and one in Alabama. The die factory will be established between these locations -- in Kentucky. Koito plans to invest approximately 2 billion yen initially and spend five years to develop the plant as the production facility for small- to large-size dies. With this establishment, the company's in-house production rate for dies is projected to go up to around 25 percent in a few years, which will allow Koito to curb total cost including delivery expenses. The new headlamp factory in Alabama, on the other hand, is intended to cater to the needs of Japanese and U.S. companies, which are raising their production volumes in the south. Investment will be held down to some 2 billion yen, as the company will install production equipment including used devices. Koito has already acquired a plant site for this factory, whose area is equivalent to that of its existing plant. The plant's production volume is planned to reach 200,000 to 300,000 sets a year in the initial phase, which will be increased to 500,000 sets in steps. (From an article in the Nikkan Jidosha Shimbun on January 1, 2011)

<Indonesia>
-The Company will establish a subsidiary in Indonesia in June for manufacturing and marketing automotive lighting equipment. The new subsidiary, PT. Indonesia Koito, will respond to growing orders for its motorcycle and automotive lighting equipment as the Group's second foothold in ASEAN countries after Thailand. The headquarters and plant will be located at the industrial park in Karawang. It will be capitalized at US$30 million, 90% of which will be held by Koito while 10% will be held by Toyota Tsusho Corp. For the plant, a 20,000-m2 building will be constructed at the 80,000-m2 site. Four hundred employees will be hired. Production is scheduled to commence in April 2011. The annual production capacities of automotive headlamps, motorcycle headlamps and motorcycle beacon lights, to be achieved by 2012, are 400,000 units, 1,200,000 units and 1,200,000 units respectively. (From an article in the Nikkan Jidosha Shimbun on May. 11, 2010)

Planned Capital Investments

(As of Mar. 31, 2011)

Company / Plant	Equipment to be introduced	Estimated amount of investment (in million JPY)	Project Period
			From	To
Shizuoka Plant (Shizuoka Pref., Japan)	Manufacturing equipment for automotive lamps, etc.	1,901	Apr. 2011	Mar. 2012
Haibara Plant (Shizuoka Pref., Japan)	Manufacturing equipment for automotive lamps, etc.	1,485	Apr. 2011	Mar. 2012
Koito Kyushu Ltd. (Saga Pref., Japan)	Manufacturing equipment for automotive lamps, etc.	1,621	Mar. 2011	Mar. 2012
North American Lighting Inc. (Illinois, USA)	Manufacturing equipment for automotive lamps, etc.	5,319	Mar. 2011	Mar. 2012
Shanghai Koito Automotive Lamp Co., Ltd. (Shanghai, China)	Manufacturing equipment for automotive lamps, etc.	4,094	Mar. 2011	Mar. 2012
Thai Koito Co., Ltd. (Samutprakarn, Thailand)	Manufacturing equipment for automotive lamps, etc.	4,150	Mar. 2011	Mar. 2012